Centre releases Rs 46K cr from tax pool for states' Covid-19 fight

New Delhi: In an attempt to assist states effectively address the situation arising out of Covid-19, the Centre on Wednesday released the May instalment of states' share in Central taxes amounting to over Rs 46,000 crore.

The sanction for May instalment follows release of April instalment last month ahead of schedule as a special dispensation to meet immediate funding needs of the state governments looking to restore economic activity and minimise losses to its citizens due to disruptions caused by lockdowns.

"Finance Ministry has issued sanction orders for Rs 46,038.70 cr today for the May instalment of Devolution of States' Share in Central Taxes & Duties," the Finance Ministry said in a tweet.

"These releases, similar to April releases, have been calculated based on tax receipts projected in Budget 2020-21 & not as per actuals. GoI's prime objective has been protecting States Revenues & meeting their liquidity requirements in their fight against #COVID19 global pandemic," another tweet from the ministry said.

As per a government statement, the highest share of central taxes for May has gone to Uttar Pradesh with a net transfer of Rs 8,255.19 crore. This is followed by Bihar at Rs 4,631.96 crore. West Bengal has got Rs 3,461.65 crore while Madhya Pradesh has got Rs 3,630.60.

Maharashtra share has been lower at Rs 2,824.47 crore. Goa and Sikkim have got the least from central pool of taxes at Rs 177.72 crore and Rs 178.64 crore, respectively.

In its interim report for FY21, the 15th Finance Commission has reduced the share of states in the divisible pool of central taxes by one percentage point to 41 per cent, factoring in the conversion of the erstwhile state of Jammu and Kashmir into two Union territories.

The report, tabled in Parliament in February, has also changed the criteria and weights under which funds are allocated to states.

It assigned 15 per cent weight to the population of a state, down from the 17.5 per cent allocated by the 14th Finance Commission, but raised the weight under demographic performance from 10 per cent to 12.5 per cent.

The FFC report has also introduced "tax effect", for states, with 2.5 per cent weightage, while significantly reducing the weight for income distance from 50 per cent to 45 per cent.